Jessica M. Karmasek Mar. 15, 2013, 1:15pm

LITTLE ROCK, Ark. (Legal Newsline) -- Arkansas Attorney General Dustin McDaniel says an arbitration panel has issued a ruling that will allow a settlement to proceed between the state and the tobacco companies that signed the Master Settlement Agreement.

The settlement ends a long-running dispute and "restores certainty" to the state's annual payments from the 1998 MSA, the attorney general said Thursday.

Under the MSA, 46 states settled their Medicaid lawsuits against the tobacco industry for recovery of their tobacco-related health care costs, and exempted the companies from private tort liability regarding harm caused by tobacco use.

In return, the companies agreed to stop certain marketing practices and to make payments to the states to compensate them for some of the medical costs of caring for those with smoking-related illnesses.

Arkansas receives about $60 million per year, under terms of the MSA.

Under the settlement announced this week, Arkansas will receive its share of more than half of the money that has been held in escrow for nearly a decade as the dispute was ongoing.

The tobacco companies argued that Arkansas and certain other states had violated the MSA by failing to diligently enforce state tobacco laws.

The state disagreed with the assertion.

"The tobacco companies' challenge could have jeopardized the entire annual payments that the state receives, and with them, the important anti-smoking and public health efforts paid for by these funds," McDaniel said in a statement. "This settlement assures that we no longer face that risk."

The attorney general said this year the state's annual payment will increase to its "rightful amount" for the first time in nearly a decade.

In addition, the state will receive more than half of the disputed funds, he said.

"This resolution allows us to move forward with certainty in regard to these vital health programs," McDaniel said.

Arkansas will receive the entire amount of settlement money that has been held in escrow, with the 2013 payment to be boosted by about $22.7 million.

Under the settlement, the state receives 54 cents of every dollar of the disputed payment amount. The tobacco companies take the rest as credits on future payments.

It is possible that the state's share will increase if other states join in the settlement, McDaniel noted.

McDaniel, who served as co-chairman of the Tobacco Committee of the National Association of Attorneys General from 2010-12, led the effort to reach the settlement, which was joined by 16 other states, as well as the District of Columbia and Puerto Rico.

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